PS Business Parks, Inc. PSB reported third-quarter 2021 core funds from operations (FFO) per share of $1.72, up 7.2% year over year. Results reflect higher net operating income (NOI) for the quarter. However, the figure narrowly missed the Zacks Consensus Estimate of $1.74.

Rental income came in at $110.4 million, beating the Zacks Consensus Estimate of $109.1 million. The figure also increased 6.4% from the year-ago period.

The company recorded growth in cash rental income in the quarter, which was partly offset by rise in the adjusted cost of operations.

The company also noted that as of Oct 27, it had collected 99.7% of billed revenues during the nine-month period ended Sep 30, 2021. Further, as of the same date, the company had open rent relief requests from less than 1% of its customers.

Quarter in Detail

During the third quarter, PS Business Parks executed leases on 2.0 million square feet compared with the prior-year quarter’s 1.9 million square feet. The cash rental rate growth during the reported quarter was 5%, while net effective rent growth was 15.4%.

The average lease term of all the leases executed during the quarter was 3.7 years, with associated average transaction costs (tenant improvements and leasing commissions) of $4.38 per square foot. This compares to the average lease term and transaction costs on leases executed in 2020 of 4.3 years and $3.56 per square foot, respectively, in the prior-year period.

The same-park rental income increased 6.8% year over year to $99.3 million, while the same-park NOI grew 8.5% to $70.8 million. The same-park cash rental income increased 8.4%, while cash NOI grew 10.7% year on year. The same-park revenue per occupied-square-foot climbed 4.4% year on year to $16.72. In addition, the weighted average occupancy of 94.8% increased 2.4% year on year in the third quarter.

During the quarter, the company sold a 22,000-square-foot industrial-flex building in Irving, TX, for net proceeds of $3.4 million. Also, the company sold a 244,000-square-foot office business park in Herndon, VA, fornet proceeds of $40.5 million.

Liquidity

PS Business Parks exited third-quarter 2021 with cash and cash equivalents of $46.6 million, down from the $69.1 million reported at the end of 2020.

Dividend Update

On Oct 26, the company’s board of directors announced a quarterly dividend of $1.05 per common share. This dividend will be paid on Dec 30, to shareholders of record as of Dec 15, 2021.

PS Business Parks currently carries a Zacks Rank #2 (buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.